Accountant advising tenant to rent through Ltd company?

If they didn’t tell you and started paying rent via the LTD how does the landlord know. You can have LTD company bank account with a personal name on the transfer. If they just do a monthly transfer from the LTD company instead of their personal account how would the landlord even know or for that matter care?

Reply to the comment left by JaSam at 05/10/2024 - 11:47
You're quite right... until there are problems with subletting, etc. When it becomes an eviction scenario, and the landlord can't serve notice because he's not receiving rent from the tenant. Just one example of what could happen. And with the RRB looming, things could get even worse if the owner isn't actually the tenant's landlord. That's why the landlord would care.

Why not just amend the AST to remove the clause that says no business or give her a letter to the same effect? Of course this assumes it's a house - if it's a flat you probably can't and she can't use it for business in any case

Reply to the comment left by NewYorkie at 05/10/2024 - 14:44
Subletting is a risk can that can happen regardless. We are taking about the tenant listed on the AST making payments that isn’t directly from the tenant as such. Sometime tenants pay rent via direct debit, standing order, cash deposits, cheques, parents, friends as long as rent is paid in full and on time is it the landlord responsible to check the source of every payment and if the funding source changes. As long as the receipt is issued to the tenant who cares what method they used?

I see this all the time for example a student’s parent will pay the rent as they don’t trust their child to do so but it’s the child’s name on the AST.

Reply to the comment left by JaSam at 06/10/2024 - 17:11
Landlords should check where payments come from so as to avoid inadvertently transferring the tenancy to a different tenant.

Many private landlords are casual about who they deal with (e.g. tenants' family members). They are best advised to only deal with the named tenant and to accept rent from them too. If rent is paid by a third party this shoudl be flagged to the tenant as not being acceptable, but confirming that ther is no intention to transfer the tenancy to another party.

Reply to the comment left by JaSam at 06/10/2024 - 17:11
You appear to have a very laissez-faire attitude to what is a very serious business. Get it wrong, and you, as landlord/owner, are on the hook, while your tenant can walk away with the money and zero responsibility.

Just because someone else pays the rent doesn’t nesscary mean it creates an unwritten tenancy. You need to offer the property and that person accepts and pays rent at the very least. We are not talking about that scenario exactly. Someone simply paying in my view doesn’t qualify. Especially when you issue a receipt and payment is authorised. E.g. paid by students parents (let’s get realistic who’s parents want to enter into an AST with a bunch of shared students).

My point is all around how is the landlord expected to know and check this. If the tenant choose to mask the source of payments then it’s simply unknown anyway.

Don’t get me wrong I’m not advocating 3rd party payments just stating that being pedantic and being realistic are two different things.

If the OP wasn’t aware rent payments were coming from the LTD company this cannot create an AST with that company.

Hands up how many landlords check the exact source of every rent payment across their portfolios? I pose that question to letting agents also.

An AST cannot be created with a limited company, you would need a different contract

https://blog.openrent.co.uk/company-lets-what-are-they-how-are-they-different/

I believe there is three concerns and two of them impact you.

1. ) The only legitimate reason a Ltd company would pay the rent is if it were in the company’s commercial interests to do so.

If a business is renting the property then one could argue it changes the permitted land usage with the council from Residential to Commercial, since the tenant is now a commercial entity and not an individual, thus meaning any person(s) of that business can use the property and would do so in the course of their business.

This could then incur all manner of problems with planning department and potential for business rates to be demanded.

2.) If the tenant is a commercial entity and not an individual then any person(s) acting on behalf of that business can use the premises which exposes you to a lot of risk from a legal standpoint. They could house anyone they like inside without you ever meeting them.

3.) The illegitimate reasons would be to pass off the personal expense as a legitimate business expense in order to avoid paying tax or to reclaim VAT. This would be illegal but unlikely to present a problem for you since you would have done nothing wrong, just renting a property in good faith to any paying legal entity. However, for the tenant that can pose huge risks especially if they were subject to a review.

My advice would be keep it simple. If it’s not broken, don’t change it… If the change creates no gain or loss to you, ask yourself (or your friend) what they stand to gain/lose from it.

Hope you manage to sort it out and what a good friend you are helping them out.

One final note, it sounds like they can afford to bankroll work for months/years on end and fund a startup business, then do they need such a reduced rate of rent? The disparity between what they’re paying and market rates is huge. I’d probably ask to split the difference if they’ve rented for 2 years because rent values have gone up a lot

Reply to the comment left by S P at 09/10/2024 - 21:56
Thank you SP. I fully agree.